EFFECT OF SANCTIONS ON IRAN, INDIA'S STRATEGY FOR THIS.

Image result for images of oil pumpsEFFECT OF SANCTIONS ON IRAN, EXPORT FALL; RUPEE FALL. WHAT ARE INDIA'S PLANS?

US President Donald Trump has decided not to give any exumption to any country on the import of crude oil from Iran. The biggest impact of this decision by the US is to fall on India and China. With this, the cost of crude oil for India is expected to increase by three to five percent. This can increase the inflation and the rupee may fall. Let us know what else can be the losses or advantages of India to stop oil imports from Iran.

Export will decrease

An estimated increase of three to five percent in crude oil prices will affect the country's export business. This is what the Indian Trade Promotion Council (TPCI) has said. According to the news agency PTI, Council Chairman Mohit Singla said, "There is an impact on the export sector as crude oil is used as an intermediate goods in all types of production and services. Singla believes that the cost of crude oil will increase by three to five percent immediately after the exemption from sanctions. Singla said that according to an estimate, a 10 percent increase in oil prices could lead to a trade deficit of $ 7 billion. As a result, the trade deficit will increase by 5.6 percent and the GDP will fall by 0.2 percent. This will also increase the pressure on the rupee and its impact will come in the form of expensive import.

Inflation will increase


The rise in crude oil prices will lead to the fear of rising inflation again. The experts believe that till the election, the government will stop its effect in some way, but the price of petrol and diesel will be increased as soon as the new government is formed and due to this, inflation will also increase.

Rupee will fall

Even before the current account deficit increases, the rupee on the slopes may fall further than the dollar. The increase in import bill will increase the pressure on the rupee. Rupee depreciated by 32 paise to 69.94 against the dollar on Wednesday.

This will be the impact on the treasure

The expensive crude oil, which is due to the imposition of oil imports from Iran, will also affect the government treasury. This effect will be on both revenue and expenditure.Talking about the revenue front, the state's revenue will increase due to the rising prices of petrol and diesel, because their taxes are based on price, but there will be no impact on the revenue of the Center, as it gets fixed tax per liter. Increase in subsidy expenditure on fuel will increase the central government expenditure. Care had earlier predicted that in this financial year, Rs. 32,989 crore will be spent on LPG and Rs. 4,489 crore on kerosene.

10% of India's oil imports from Iran

World's third largest oil consumer, India completes 80 per cent of its crude oil requirement and about 40 per cent of natural gas needs from outside . Domestic oil and gas production has been falling continuously in the past few years. In case of oil, India is second largest importer after China. In 2018-19, India imported 2.45 million tonnes from Iran, which constitutes around 10 per cent of the total import of crude oil, 22.04 million tonnes.

What will India do now

Iran has been the fourth largest exporter of oil for India in the year 2018-19. No other country can offer such facilities to India in terms of prices and credit facilities. The US has put this restriction at a time when the price of Indian crude baskets (the average of Dubai, Oman and Brent crude prices) is increasing, and there is a round of Lok Sabha elections in the country. Experts say that India can make a huge reduction in its oil imports from Iran, but perhaps it will continue importing 1 lakh BPD (barrel per day) from Iran and can avail the payment facility in rupees for this. It is also necessary for energy security in the country. Also, in political terms, Iran has a historic relationship with India and India will do its utmost to maintain this contact.

Indian refineries have made half of oil imports from Iran almost half since the ban by the US in November last year. The US had given exemption to India, China, Japan, South Korea, Taiwan, Turkey and Greek for six months i.e. until May 2, 2019. Indian refineries are now preparing to increase purchases from OPEC, Mexico and the United States to meet their crude requirements.

In November last year, the US gave 180 days to eight countries to explore alternate options for oil import from Iran, which is being completed on May 2. Three of these eight countries, Greece, Italy and Taiwan have already reduced oil imports from Iran to zero. The other five countries include India, China, Turkey, Japan and South Korea, which will now have to either shut the oil imports from Iran or face US sanctions.

Government of India has said that the country is ready to deal with this shock and a 'strong plan' has been made to maintain adequate supply of crude oil to the refineries. After the exhaustion of the oil imports from Iran by the US, the Sensex plummeted 495 points on Monday, and on Tuesday it was down 80 points. On Tuesday, the start of the Sensex business started with a rise but this growth was broken in the last hour. At the end of the trading, the Sensex dropped 80 points to 38,565, while the Nifty dropped 19 points to close at 11,575. In this case, the Sensex has dropped 575 points in two trading days.
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